Offshore Continues to Bite Back

I’ve been writing about the problems with offshoring—and the welcome springing back of the reshoring phenomenon for quite some time. Lately, it has been very interesting to watch how the trend is affecting more than just the manufacturing sector.

The big story as of late has involved the new Bay Bridge being constructed in the Bay Area of California. Having lived there, I know the bridge well and have followed the design and construction of this mammoth project. The Bay Bridge is actually comprised of two bridges that cross the water from San Francisco to Oakland. A tunnel through Yerba Buena Island in the middle connects the western span—the well-known, four-towered suspension bridge—and the eastern span—a thoroughly uninspiring truss structure that is rarely seen in postcards. I always laughed that poor Oakland got a bum deal in the spanning of the Bay.

Ever since the 1989 Loma Prieta earthquake, the California Department of Transportation has been working to further earthquake-proof the region’s bridges. In the mid-1990s, it was determined that the eastern span of the Bay Bridge needed so much work that complete replacement was a better solution. The design for the new span is for a graceful cablestayed design that features a single iconic tower near Yerba Buena Island.

But cost concerns became an issue in the mid-2000s. The lone bid came in twice what was expected and then-governor Arnold Schwarzenegger essentially offshored part of the project to China. While federal laws wouldn’t allow using a Chinese company to be used to produce the steel and deck components for the project, Schwarzenegger played by the letter and not the spirit of the law. The job was essentially split so the state funds paid for one part of the bridge and federal funds paid for another portion. This allowed him to outsource the “state” portion to Chinese manufacturers.

The state of California says the decision saved taxpayers money—and insists that the infrastructure to fabricate the bridge pieces wasn’t available here. But almost a decade later, the project has ballooned from $1.3 billion to at least $6.4 billion. It’s not clear what percentage of that is due to the Chinese portion of the deal, but it looks like outsourcing to another country wasn’t as cheap as had been promised. And delays of 15 months for the first steel to arrive fits in with the offshoring issues many component manufacturers have experienced in our industrial space.

The Alliance for American Manufacturing even took out billboards recently to decry the Chinese involvement. The group wants changes in how state and federal agencies award contracts to better focus on U.S. manufacturing facilities.

California still claims that it will be saving $400 million in the end by outsourcing to China. However, I question how much the state truly lost in not investing those dollars here. What would the trickle-down effect of all of those extra jobs been? That would have been a much-needed local investment of cash in the midst of the recession—especially in a state with unemployment levels well north of 10%.

Everyone in the manufacturing sector needs to be aware of the short-sightedness of outsourcing to China. It often doesn’t make financial sense, not in the short term nor in the long term. And on a more personal sense, I think it degrades the work and role of American engineers. If we can’t build our own bridges, what’s next? Manufacturing facilities? Conveyor belts? Individual components? The whole idea should send chills down your spine.